S&P; closes above 1,500
Wall Street extended its advance Thursday amid a burst of enthusiasm about the economy that gave the Standard & Poor’s 500 index its first close above 1,500 since September 2000.
The Dow Jones industrial average, meanwhile, had its third straight record close.
The S&P; 500, the index most closely watched by market professionals, rose as high as 1,503.34 on Thursday before closing at 1,502.39 points, up 6.47, or 0.4%. The gauge is within striking distance of its closing high of 1,527.46, set March 24, 2000, just as the dot-com bubble began to burst and Wall Street began a three-year decline.
Stocks have soared in recent weeks as first-quarter earnings exceeded reduced expectations, and upbeat economic news added to the gains. With the Dow having gained more than 700 points in April alone, there is concern that investors may be getting overly enthusiastic given the uncertainty in the housing market and other sectors of the economy.
Inflation fears eased Thursday. The Labor Department said wages, as measured by unit labor costs, rose at a tepid 0.6% rate in the first quarter and productivity was better than expected. The news fed Wall Street’s hopes for an interest rate cut this year.
Also boosting stocks was a report showing that the Institute for Supply Management’s index of conditions in the services sector of the economy rose to 56 in April from 52.4 in March.
“You’re seeing some vertigo out there, the fear we’re getting ahead of ourselves,” said Arthur Hogan, chief market analyst at Jefferies & Co. “There’s going to be natural trepidation at new levels, but you rationalize these levels in knowing that we haven’t overextended ourselves like we were in 1999.”
The Dow rose 29.50 points, or 0.2%, to 13,241.38. The blue-chip index has hit 18 record closes since the start of the year.
The Nasdaq composite index rose 7.62 points, or 0.3%, to 2,565.46.
The S&P;’s achievement marked another milestone in Wall Street’s recovery from a prolonged slump at the start of the decade. The slide began with the end of the technology boom, then accelerated as the economy fell into recession and the market felt the effects of the Sept. 11, 2001, terrorist attacks. Corporate scandals including the collapse of Enron Corp. and WorldCom Inc. took a further toll on the market.
The S&P; fell to a low of 776.76 on Oct. 9, 2002, before starting its recovery.
With the latest rally, “people are watching the momentum moving the market higher and in some cases they’re participating, maybe grudgingly, but they’re missing out otherwise,” said Bill Schultz, chief investment officer at McQueen, Ball & Associates. “There are a lot of people that are looking for a dip to buy and we haven’t seen it. At some point you have to say, ‘The dip isn’t coming but I want to participate.’ ”
Other economic data also helped shape investor sentiment Thursday. The government reported that the number of Americans seeking unemployment benefits fell by 21,000 last week to 305,000, the lowest level since mid-January. The decline was broader than expected and marked the third straight decrease in weekly claims.
Today the government is to report on nonfarm payrolls and unemployment.
Besides economic data, the parade of earnings reports continued Thursday with General Motors turning in lower first-quarter earnings. GM’s profit fell 90% from the year-earlier period, which benefited from a gain. The company also suffered losses in the residential mortgage business of its GMAC affiliate. GM fell $1.75, or 5.4%, to $30.69.
Bond yields rose in the wake of the economic data. The yield on the benchmark 10-year Treasury note rose to 4.67% from 4.64% on Wednesday.
Oil futures fell 49 cents to $63.19 a barrel on the New York Mercantile Exchange.
The dollar rose against the euro and the yen, and gold jumped $9.50 to $681.80 an ounce in New York.
In other market highlights:
* Delta Airlines slumped $1.03 to $20.72 in its first day of trading after it emerged from bankruptcy protection.
* IAC/InterActiveCorp tumbled $2.49 to $36.10 after the Web firm’s profit missed forecasts.
* RealNetworks rallied 67 cents to $8.26. The operator of the Rhapsody online music service said that it expected to earn as much as 6 cents a share in the second quarter, excluding some items, exceeding forecasts.
* Other stocks reacting to earnings reports included sound technology firm Dolby Labs, which jumped $2.40 to $37.45 after beating expectations, and Pasadena-based engineering firm Tetra Tech, which lost $1.26 to $19.99 after its results matched analysts’ estimates for the quarter.
